Option Activity for Starbucks Corporation (SBUX) and MannKind Corporation (MNKD)
Tuesday, June 29, 2010
I hope that your trading session is going well, as I know that members of S.O.M.E. are making the most of the market movements and their returns.
Put trading has ramped up today on both Starbucks Corporation (SBUX) and MannKind Corporation (MNKD), with bearishly biased option activity easily outstripping the respective daily average for each stock. However, the similarities between the two equities end there. While MNKD has earned the attention of put players with its lackluster technical performance, SBUX remains firmly entrenched in a long-term uptrend.
Put volume has surged to 14 times the expected level on SBUX, with roughly 13,000 contracts crossing the tape by midday. Meanwhile, only 1,385 calls have traded on the caffeine king. Most active is the stock's January 2011 20-strike put, where 11,091 contracts have been exchanged. Several sizable blocks have traded at the ask price, indicating they were most likely purchased, and implied volatility on this LEAPS option is up 1.3% this afternoon.
No news in particular seems to have sparked this flood of put volume, but the skew toward bearish bets is part of a larger trend. SBUX's 10-day International Securities Exchange (ISE) put/call volume ratio of 2.49 ranks in the 98th annual percentile, not far from a pessimistic peak. Elsewhere, short interest on SBUX surged by 38.6% during the most recent reporting period, revealing that skepticism is on the rise across Wall Street.
However, if the coffee concern catches a lift from long-term support, bears could find themselves rushing to cover their losing bets. SBUX is in the process of pulling back to reliable support from its 10-week and 20-week moving averages, which have underlined the equity's ascent since March 2009.
Meanwhile, put volume has rocketed to 27 times the norm on MNKD, with about 19,000 contracts changing hands. Most of this volume appears to be linked with a spread strategy. Several large blocks have traded at the bid price on MNKD's January 2011 10-strike put, indicating they were sold, and each block has been accompanied by a matching group of February 2011 10-strike puts, all of which have traded at the ask price.
Volume is outpacing open interest at both strikes, so it looks like this spread strategist may be opening a calendar spread on MNKD. However, it's also possible that a long-term trader is rolling out his January-dated put position to the February series. At last check, MNKD was down more than 6% to trade near $6.67, with the stock retreating from resistance at its 20-week moving average.
SPECIAL DISCOUNTED MEMBERSHIP RATES UNTIL JUNE 30, 2010